Dr. Jeff Balser, vice chancellor for Health Affairs at Vanderbilt, says details on the early retirement would be released soon.

Written by

The Tennessean

VUMC’s employee numbers:

At the end of Vanderbilt University Medical Center’s fiscal 2012 year, the medical center had about 16,883 employees. That includes 16,293 full-time employees and 570 part-time staff, said VUMC spokesman John Howser. VUMC also has 2,532 faculty members.

More

ADVERTISEMENT

Vanderbilt University Medical Center is looking to trim $100 million from its budget for the current fiscal year and will pursue several options, including offering early retirement for certain employees.

That option would be available to staffers who might wish to retire earlier than planned, Dr. Jeff Balser, vice chancellor of health affairs and dean of Vanderbilt’s School of Medicine, said in a memo that offered new details on cost-cutting measures at Nashville’s largest private employer. He said details on the early retirement would be released soon.

In recent weeks, the academic medical center has been reducing its workforce by at least 300 employees as executives try to plug a $70 million shortfall in revenue for this year compared with the previous fiscal year. The $100 million in targeted cuts or savings for this year equates to just more than 3 percent of budgeted expenses, Balser said, adding that VUMC’s overall annual budget is roughly $3.3 billion.

His memo signaled more workforce reductions over the next two years as part of “strategic downsizing” and a workflow re-engineering effort called Evolve to Excel, or E2E. Overall, VUMC is targeting $250 million in budget savings over two years, or roughly 8 percent of its current expenses.

The cuts are coming as Balser and other officials said VUMC is experiencing declining reimbursements for its three largest sources of federal revenue — reimbursements for services to patients insured by Medicare and Medicaid, along with declining federal support for research through the National Institutes of Health.

People familiar with VUMC’s plans expect its workforce to be reduced by more than 1,000 employees over the next two years.

“It is clear that we must embark on a comprehensive effort that is immediate, achievable, proactive and ensures success over a multiyear period, while the health care and biomedical science economies we live in reshuffle into a ‘new normal,’ ” Balser said in his memo to the staff. “Our plan will preserve the vast majority of our mission-critical programs, while keeping compensation at market-competitive levels.”

Nationwide, similar cost-cutting steps are being taken by other hospitals and academic medical centers.

“It reflects the fact that Vanderbilt is an extremely well-run organization and they realize that they’re going to have to cut expenses to remain viable,” said Joshua Nemzoff, a hospital industry consultant.

Balser referred to savings from supplies, facilities, contract improvements and other nonlabor cost areas as the highest and first priority under the Evolve to Excel effort that’s focused on saving costs through improving function and expected to boost revenues in targeted areas.

Management consulting firm McKinsey & Co. is helping with identifying and implementing cost-savings opportunities that include simplifying various systems and services many VUMC employees use on a daily basis, Balser added.

In addition to offering early retirement, VUMC plans to take advantage of regular retirements and other staff departures including through re-engineering workflow to reduce the need to replace those positions. Some positions also will be permanently eliminated, mostly in support and overhead functions versus direct patient care jobs. A hiring freeze that has been in effect over the past two quarters will continue, Balser said.

Additionally, VUMC plans to move to a new paid time off plan that combines vacation, personal, holiday and sick leave and introduces a new paid parental leave benefit.

Spokesman John Howser said details on that plan would be made available to employees in the next several days.

Getahn Ward covers growth and development. Contact him at 615-726-5968 or at gward@tennessean.com. Follow him on Twitter @Getahn.